Nokia suffers $1.76 billion loss, Lumia sales mixed

The phone maker runs into Lumia launch challenges in the U.K., and overall sales so far have not been as strong as hoped.

Nokia CEO Stephen Elop shows off the Lumia 900 at CES 2012
Nokia CEO Stephen Elop shows off the Lumia 900 at CES 2012. Lori Grunin/CNET

Last updated at 6:49 a.m. PT.

Nokia CEO Stephen Elop said that the company's Lumia launched to "encouraging awards and popular acclaim," but "actual sales results have been mixed."

Elop made the comments in Nokia's earnings statement. Nokia reported first quarter results in line with its profit warning.

The Lumia launch is critical to Nokia given it is under fire in emerging markets and at the low end of the phone spectrum. Here's Elop's assessment.

We have launched four Lumia devices ahead of schedule to encouraging awards and popular acclaim. The actual sales results have been mixed. We exceeded expectations in markets including the United States, but establishing momentum in certain markets including the UK has been more challenging.

Meanwhile, Elop said that it has to battle on the feature phone end of the spectrum. Nokia will renew its Series 40 platform, fill product gaps and largely compete on price.

The crunch on the high end and low end of the device market could be deadly for Nokia. On one hand, Elop said it will ramp Lumia advertising and new features with "a clear sense of urgency." On the other side of the equation, Elop noted that it will be aggressive on the low end of the market while conserving cash.

Conserving cash may become a bigger concern. Nokia's cash position in the first quarter fell 24 percent from a year ago. Sales in the first quarter were hammered across the board. This table highlights all you need to know about Nokia's standing. It's Lumia or bust.

Analysts were mixed on the news. Among the positives and negatives:

Positives:

  • Nokia is streamlining. Nokia has removed layers of sales manager and intends to improve customer focus. The catch? Colin Giles, executive vice president of sales, is stepping down, but Wedbush analyst Scott Sutherland said more execs need to go. However, Nokia wants new sales blood.
  • The Lumia launch went well in the U.S. Sure, Nokia said Lumia sales were mixed in the first quarter, but the U.S.--an emerging market for Nokia--looks decent, said analysts. CNET's Maggie Reardon noted that Nokia benefited from better training for the sales reps .
  • Nokia acknowledges its issues. The company said it will continue to cut costs and has been transparent. Transparency, however, doesn't book revenue. Wall Street appears to appreciate the effort at least.

Negatives:

  • Nokia doesn't have much of a lower-end phone plan. The company said it would reinvigorate its low-end phones. But it has to compete with an Android army. Feature phones are now touch and blending into smartphones. Good luck Nokia. Jefferies analyst Lee Simpson said in a research note:

The portfolio focus will likely be on series 40 (7 new Asha devices) in 2Q12. Here (lower price tiers) Nokia is subject to considerable pricing pressure from rivals with better or improving cost controls and full touch UI.

Translation: Samsung, Huawei and ZTE are expected to eat Nokia's lunch.

  • Windows Phone staying power questions. Simpson said that potential Lumia 900 buyers may be turned off by upgrade capability--Microsoft Windows Phone 7.5 devices can't be upgraded--and that may spook customers. Meanwhile, there are Android and iPhone 5 rollouts on deck.
  • China is tough. A lot of Nokia's issues are in China. It's unclear whether Nokia can compete with homegrown handset makers on price.

This story was originally published at ZDNet's Between the Lines under the headline "Nokia's Elop: Lumia 'actual sales have been mixed'."

 

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